Business Negotiators Find the Right Fit

Examples of negotiation in business - a partnership too good to be true?

When approached by a partner whispering sweet nothings about untold riches and power, it can be tempting to rush through the negotiation process.

But if you do, you could find out too late that your Prince Charming is nothing but a frog—and that those glass slippers on your feet pinch. That’s how famed shoe designers Kari Sigerson and Miranda Morrison felt in 2006, not long after inking their seemingly sweetheart deal with Marc Fisher, the scion of the 9 West shoe fortune, as reported by Jessica Lustig in the August 1 New York Times.

After graduating together from design school, the designers introduced their Sigerson Morrison line in 1991. Before long their tiny store in New York City had become a “destination,” according to Morrison, with supermodels and movie stars clamoring to get in.

Throughout the 1990s and 2000s, Sigerson and Morrison was the high-end shoe brand to watch. By 2005, the designers had opened shops in Los Angeles and Tokyo, and introduced a lower-priced line. Their company was reportedly worth $30 million, and they began looking for investors to help them take it to the next level.

Through investment banks serving as matchmakers, Sigerson and Morrison were introduced to Fisher, who was cobbling together a mass-market shoe company. The high-end brand seemed an odd fit for Fisher’s more down-market company, writes Lustig. But Fisher made an offer that apparently dazzled Sigerson and Morrison: $2.6 million to acquire their company and the intellectual-property rights to its name. The founders each retained a 10% stake in the company and were hired as co-heads of design for seven years at an annual salary of $350,000 each, according to Lustig.

But the honeymoon was over quickly. Sigerson and Morrison soon came to believe that Fisher was knocking off their designs for his discount line. (Fisher has been sued twice for stealing other companies’ designs.) And the women objected to Fisher’s cost-cutting decision to move production from China to Italy.

On March 2, 2011, the designers were summarily fired. Three weeks later, Fisher sued them in New York State court for $1.95 million in damages, alleging they were late in delivering a collection of shoes. Sigerson and Morrison countersued, seeking $6 million in damages. They said Fisher had approved the late delivery, which they attributed to a factory mishap, and they also accused Fisher of sexual harassment.

Meanwhile, Fisher put anonymous in-house designers in charge of the line and priced Sigerson Morrison shoes about a third lower than before. As for Sigerson and Morrison, since their deal with Fisher prevented them from designing under their own names, they were left working for other stores and designers, with little hope of reclaiming their names.

“All I want to do,” Sigerson told Lustig, “is what I did.”

Luckily, Sigerson and Morrison won their lawsuit in 2014 to the tune of $2 million, but the story serves as a cautionary tale for any business negotiator who is considering a new partnership with someone unfamiliar. Take big dollar signs and even bigger promises with a grain of salt. Spend time getting to know potential partners, talking in depth about your dreams and what each side brings to the table. Research their reputations thoroughly. If you do get to the contract-drafting stage, have a good lawyer vet it carefully. Above all, if the shoe doesn’t seem quite the right fit, don’t wear it.

2 Responses to “Business Negotiators Find the Right Fit”

When much is at stake, as in a business “marriage” you better have both a strong gut feeling and have done exhaustive research because there are surely unprofessional, unethical human beings and companies in this world.

I won’t speak to the parties specific to the article above because I don’t know the particulars of their relationship but extensive time, dialogue, investigative research, negotiation (and being intuitive to the culture of those bargaining periods) will tell you much more about someone or a company then you might think.

Even the attorney’s approach and contractual language will tell you whether entering into agreement is mutually beneficial.

As much – also from bitter experience – as I agree with the article’s gist, thank you very much for it, I wonder if the cost cutting measure had been in the opposite direction, from Italy to China, or if I have missed an anomaly in production costs?

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Preparing for Negotiation

Understanding how to arrange the meeting space is a key aspect of preparing for negotiation. In this video, Professor Guhan Subramanian discusses a real world example of how seating arrangements can influence a negotiator’s success. This discussion was held at the 3 day executive education workshop for senior executives at the Program on Negotiation at Harvard Law School.

Guhan Subramanian is the Professor of Law and Business at the Harvard Law School and Professor of Business Law at the Harvard Business School.